Can I use Home Improvements as a Tax Deduction?

by on March 19, 2012Jason Van Steenwyk

home improvement and tax deductionsThe rules regarding tax deductions for home improvements and repairs can be complex and confusing, even for the pros. But sooner or later, all properties are going to need a little TLC – and you’re going to have to figure out how to treat them on your tax returns.

First, let’s take a look at personal residences.

Home Improvement and Tax Deductions for Personal Home

The IRS considers repairs and renovations on your personal residence to be personal expenditures, not business expenditures. So unless special circumstances apply, such as the use of part of your home for business purposes (see the so-called “home office deduction” for more information on this), you cannot take a current-year tax deduction for maintenance costs and renovations on your personal residence.

In compensation, however, your tax break for personal homeownership comes when you sell the property: Provided you have lived in the property for at least three of the five years prior to the sale (special rules apply for military members who had to leave home on orders), you are entitled to a capital gains tax exclusion of $250,000 if you are single or $500,000 if you are married and file a joint income tax return.

An Introduction to Tax Basis

The IRS calculates a taxable gain as the difference between your sale price for the property and your tax basis. This number is the sum of all investments you have made in the property over the years, from the time you made the purchase through the new roof to the new paint and the new indoor pool you put in, all the way to replacing the bathroom tiles right before your real estate agent showed the home.

Then you subtract any deductions you took to arrive at your adjusted basis (though these are few and far between for personal residences). Your taxable gain is your sale price minus your adjusted basis. If the resulting number is negative, then you have a capital loss.

For investment properties, however, the system is more complicated. You must differentiate between a renovation or improvement and a repair. Further, you must understand depreciation and amortization, which is how costs that provide a benefit over many years, as well as the gradual wear and tear or decay of a property, are accounted for on your tax return.

Repairs vs. Home Improvements and Renovations

When you spend money simply to keep a property functioning and usable, and prevent its deterioration, or do routine and ongoing maintenance on an investment property, as opposed to a personal residence, the IRS classifies these activities as repairs, and recognizes these as an everyday cost of doing business.

There is a grey area between repair projects and renovations. But according to a recent article in the Journal of Accountancy, you can’t take a direct deduction for anything you pay for brand new buildings, nor can you take a current year deduction for any permanent improvements that increase your property values. Additionally, you don’t get to deduct any amount you spend restoring property (other than routine repairs), or in renovating a property after you’ve already taken a depreciation deduction. Moreover, under Treasury Regulation 1.263(a)-1(b), you can’t immediately deduct the cost of any projects that substantially prolong the useful life of property owned by the taxpayer or (2) adapt property to a new or different use.

Repairs and Routine Maintenance

Here are some examples of repairs:

  • Cleaning carpets and drapes
  • Cleaning air ducts and vents
  • Repairing a broken handrail in a shower or staircase – restoring the original function of the property.
  • Repairing broken glass after severe weather.

Renovations and Home Improvements

Renovations, on the other hand, are projects that involve improving the property from its original or normal function, increasing the property’s value, substantially lengthening its expected life, or converting it to a new purpose altogether. Generally, these are expenditures that will pay dividends or provided benefits for longer than one year – and potentially improve your investment income or resale value as an investor.

These expenditures cannot generally be deducted all in the first year. Instead, the IRS does not consider these costs to be business expenses, deductible as you pay them. Instead, the IRS considers these expenditures to be capital investments – and subject to a different set of rules: You must generally spread these deductions out over the probable useful life of the property in a process called amortization and depreciation.

Example of Depreciation

Let’s say you wanted to build an addition to an investment property, to install, say, a new bedroom. You spend $25,000 on the renovation. It adds to the value of the property, so it does not qualify for a tax deduction in the current year.

By spending the $25,000, you have increased your tax basis in the property by the same amount.

After that point, however, the IRS knows that that home improvement, like almost any capital investment, will deteriorate over time. So the tax code provides a way for you to deduct the invisible losses represented by that deterioration and wear and tear. To figure out your allowable deduction, fill out a copy of IRS Form 4562. The IRS publishes more details in Publication 946 – How To Depreciate Property. But in a nutshell, you can choose one of a few different methods to calculate your annual depreciation.

Each kind of property has a different depreciation schedule, based on an estimate of its useful life. Investment structures are assumed to have a useful life of 27 years, under Modified Accelerated Cost Recover System (MACRS) rules – which is what you use for property you placed into service prior to 1986, so you can gradually take your deduction over that period of time. However, your tax basis declines as you recoup your costs through depreciation, as well. For residential real property years, theoretically, your adjusted basis in the asset will actually reach zero after 27.5 years – the depreciation period for residential rental real estate.

Another example: What can you deduct each year on a $25,000 capital improvement project? The most straightforward method is this: Divide your investment by the depreciation period for that class of property. Since residential real estate is 27.5 year property, you can take a deduction of $909.91.

cost/depreciation period = depreciation tax deduction
$25,000/27.5 = $909.91

The process of spreading depreciation deductions out over the expected life of a piece of property is called capitalization.

Note that you cannot depreciate land. Land doesn’t wear out (although you can claim depletion allowances for the extraction of timber and minerals).

For a full breakdown of depreciation rules for residential rental real estate, see IRS Publication 527 – Residential Rental Property.

{ 76 comments… read them below or add one }

Don October 4, 2014 at 1:17 pm

we did a good deal of work prior to selling house, one question I am not sure about after reading several sites. we tore up soilded carpeting the wood flooring underneath needed repair and refinishing, that is what we did, end result was night an day better, but is this home improvement, as rugs not replaced
thanks

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Nichola Macpherson September 22, 2014 at 1:06 pm

Hello, I have a home base office/business and I have out grown my office space. I’m thinking about moving into the garage. To do this i have to put a new garage door/ AC lighting and drywall, can I claim this on my taxes? If so, what percentage would I get back. If i do it this year 2014, can i claim it on this years taxes?
thankyou

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Gardenia Simon April 26, 2014 at 6:39 pm

We had to replace the roof on our house because of leaking when the snow would melt or raining. Also replace a leaky toilet that leaked water into our basement even when we were not using it. Can we deduct these on our taxes?

Gardenia

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brian April 15, 2014 at 10:46 pm

i bought a house 4 years ago electrical outlets starting blowing out all over i called an electrician its an old house and he said it was a fire trap i paid him 3500. 00 to fix is this deductable

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Sam C April 13, 2014 at 5:27 pm

What improvements can be deducted to enhance the homes sale value?

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Sam C April 13, 2014 at 5:25 pm

Can I deduct improvements needed to prepare a property for sale?

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Kenneth W. Brody July 13, 2014 at 12:48 pm

Must replace my home’s septic system according to State Law. Also must replace specific fire and CO2 detectors and electrical circuit boards Over $25,000. Are any of these costs deductible (Both IRS and MA state taxes?
Thanks very much for any answers.
Ken

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beth March 17, 2014 at 12:11 pm

Is the waterproofing of my basement tax deductible?

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Kenneth W. Brody July 13, 2014 at 12:51 pm

I need this question answered, and a new roof put on during October 2012 freak storm; insurance covered part of the cost.
Thanks, Ken

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Div February 18, 2014 at 6:16 pm

What do about flips? Would normal expenses like utilities and Prop Tax and insurance be capital improvements since they are used to sell the home improve and sell the home? Or would I just normal losses that show up as negative rental income.

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Andy February 17, 2014 at 12:52 pm

I had to make repairs to the exterior of my primary home. As well as replacing both my vac systems. Can I deduct those expenses?

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James February 17, 2014 at 5:29 am

Hi. My pipes burst in my vacant rental property last winter causing catastrophic extensive damage. Pipes, radiators, floors, water heater, some walls, etc. had to be replaced to the tune of 70k. Basically we replaced what had originally been there. The only ‘improvements’ were more modern equipment: i.e. radiators, water heater, etc. I could not rent the property without making these repairs; it is now rented. Is this really a renovation project that must be depreciated or a straight write off repair? Feels like repairs to me. Your thoughts please. Thank you.
- James

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Jim Dunne August 4, 2014 at 9:59 am

Are water damages to a rental property a straight write off or part of the depreciation?

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Hal February 8, 2014 at 7:21 am

Trying to ask a question. Can I somehow write off some of the $25,000 my home has Depreciated in value?

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Jeff Duncan February 5, 2014 at 9:48 am

We installed Plantation shutters in our home. They are saving us energy so are the tax deductible?

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Jamie February 2, 2014 at 1:51 pm

We sold our home in 2013 and purchased another home. We had to replace our septic system in order for the sale of our home to go through. Can this be deducted on our 2013 taxes? Thanks.

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sam jackinski February 21, 2014 at 9:58 am

we sold our home in june, 2013, but before selling our home we needed to replace the entire septic system which cos us $32,000 dollars. after the buyers made an offer on the house and we accepted the home inspection told us we needed to replace the septic system before selling the house. the buyers still wanted the house but would not agree to help pay for the new septic system so we had to pay the full amount.Our question is when filing our federal income tax this year 2014 for 2013 taxes can we deduct any of the cost, 32,000 on our income tax. we sold our house in june and moved to denver, co.and we did not purchase another house we are renting an apartment in denver, co. Thank you, sam

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MAKC February 2, 2014 at 1:50 pm

Replaced the roof on a nonresidental rental building in 2013. The old roof was not fully depreciated at the time the new one was installed. Do I get to take the ramaining depreciation on the old roof on my 2013 tax return?

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Bob Wendorf January 2, 2014 at 7:50 pm

I didn’t do research on this site to see if my question (from someone else) has been previously answered (but) I have lived in this house for 42 years, having purchased it for very little money (more than I could afford then, but a pittance now) and will be selling it soon for buckets of money; my one time capital gains exclusion (including my wife of many years) is the $500K but our capital gain might be $200K more than that

I have kept my receipts for all the materials I have purchased for the improvements I have made, but did all the work myself (except for some “strong backs” from time to time) I was told years ago by the IRS that unless I was a “business licensed contractor” and billed myself I could not put a value to my labor (which has been considerable over time)

could the “fair market value” by an appraiser establish the difference in value between the cost of materials and my labor? the difference might mean more than $40K in capital gains taxes

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Norma January 1, 2014 at 12:10 pm

This past year, we had to replace a large skylight in our kitchen after having it creating so much heat loss that the water dammed on the roof edge, backed up and ran into the kitchen. We had the roof assessed and paid $10,500 to replace the poor underlayment and shingles along the whole front of the house. We used to have 5-8′long ice all along the front of the house. Now, there is none! Can we deduct any of this cost due to the heat loss from the skylight removed and roofing and shingles replace it? Thank you so much for your time.

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Gerald December 16, 2013 at 9:29 am

Hello…my question is related to new appliances that I purchased for a rental property that I recently acquired. The property did not have any appliances and I had to purchase appliances in order to rent it. Do I still have to depreciate the appliances or would they be considered a repair being that they were removed by the previous owner?

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JESSICA November 30, 2013 at 7:05 pm

HELLO I HAVE A QUICK QUESTION FOR YOU MY HUSBAND AND I PURCHASED A CONDO (ITS OUR FIRST HOME AND OUR PRIMARY RESIDENCE) ON DECEMBER 28, 2012. WHAT IF ANY TAX CREDITS WOULD WE QUALIFY FOR? I.E. FIRST TIME HOMEBUYERS?

THANK YOU,
JESSICA

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marino November 28, 2013 at 7:24 am

I recently renovated my kitchen and paid taxes on all new cabinets and appliances. Is the taxes charged on the renovation be used on my income taxes when I file for my taxes as capital improvements for 2013?

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Kathi March 24, 2014 at 3:01 pm

I too completely remodeled and replaced all appliances in my 1970′s kitchen. What deductions would I take?

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Jonathan October 15, 2013 at 6:35 pm

We bought our home in 2008. I deployed to iraq and then we moved to new york with our government jobs. We have lived in the house since 2010. Basically only 1 whole year out of almost 6. Our last renters pretty much destroyed home and moved out. We have spent nearly $15000 on repairs not to to mention new water heater and ac unit. We are selling it at a loss costing us 5000 more.

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Mike January 26, 2014 at 11:00 am

Having read the Q/A here, I suspect that I know the coming answer, but..

I put an in-ground pool in the back yard of my personal home during Summer 2013, can I deduct the sales tax paid on materials?

mj

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Luis October 1, 2013 at 6:58 pm

Are the interests of my loan to build a pool a deduction in my tax?

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Caleb September 23, 2013 at 6:56 am

Very good post. Thank you for clarifying many of these issues.

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Sam b September 22, 2013 at 5:07 pm

Hi,

We would be renting out our house in Nov and would most likely list it for renting after october 15. We Would be taking care of our property ourselves ,in terms of renting .We have to fix a few things around the house like,cracked grout,replacing the grill plates on our burner and also add a appliance insurance like service america contract.
To be able to deduct these expenses in the coming tax year,do we need to wait to list the house for rental and then make these repairs etc or can we still do it now and still be able to deduct these expenses? Thanks

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John April 7, 2014 at 7:25 pm

Hi. I bought a house last month and I plan to use it as my personal residence for 1 or 2 years and then rent it out. I also plan on buying a whole new HVAC system in a couple of weeks. My question is, once I start renting it out, can I deduct the cost of my HVAC system through depreciation once I start renting it out in a year or two?
Thanks,
John

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Barry Solodky September 17, 2013 at 12:01 pm

Our home was built on fill and was moving down the hill. We incurred substantial engineering and building costs to stabilize the property so we could continue to reside there. Can any of those be deducted?

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Sean September 13, 2013 at 5:50 am

Jason,

I have a little more complex question for you. I recently purchased a foreclosed property that I am renovating, to the sum of approx. 50K. I realize that since it is my primary residence that the renovations would just add to cost basis. However, I am renting out 3 of the 4 bedrooms to friends. Would it make sense to put the house under an LLC and depreciate the improvements or just keep the house under my name? If I did put it under the LLC, 1:do the improvements need to be depreciated or can they be written off as a business expense? 2:what proportion of the improvements/house can be depreciated? (im guessing 75%?) and what can be written off as a business expense? (im guessing utilities?) 3:what would happen if the renters move out in a year and I’m the only one living there or I just have 1 renter left?

Sorry for the extended question(s), but your help would be much appreciated!

Regards,

Sean

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Christina Atkins September 12, 2013 at 10:57 am

Can you deduct improvements to the home (fixing foundation and removing an oil tank) if you are not selling it, but are donating it to a charitable organization?

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Debi GALLOVICH September 6, 2013 at 11:45 am

cAN YOU WRITE OFF A NEW SEPTIC THT IS AN UPDATE AND THE ENGINEER WHICH COSTS OVER 12,000 .

Thank you Debi

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Jason Van Steenwyk September 10, 2013 at 4:16 pm

Hi, Debi! Thanks for writing!

I answered a similar question some months ago, in this thread, but here’s my answer, cut- and-pasted:

If it’s your residence, there’s no deduction. Add it to your cost basis. You recover it (in theory) when you sell the house. In reality, it’s usually covered under the capital gains exception for selling a personal residence (provided you have met the ownership and use test.)

If it’s an investment property, you would add it to your cost basis, and depreciate it over the expected life of the system. Now, read carefully: Normally, the depreciation period 27.5 years for integral parts of the structure of a residential building, such as venting, furnaces, new plumbing (as opposed to repairs), etc.

BUT…. Septic systems are sometimes a little different. These are separate from the building itself, and considered a LAND IMPROVEMENT, not an improvement to the structure. But if they are land improvements that are closely tied with the structure- such that the system or improvement will probably be destroyed (or have to be reinstalled) if you replace the building, you can depreciate them faster: over 15 years – in the same category as fencing and shrubbery.

See here: recenter.tamu.edu/pdf/1752.pdf”

Going one step further… the IRS even treats labor costs associated with a capital improvement as a capital expense, to be deducted over the expected useful life of the property. So chances are you’ll also have to spread your engineering cost deductions over the life of the septic system – either 15 years or 27.5 years, depending on whether the septic system qualifies as a land improvement.

HOWEVER, there’s also the possibility of using Section 179 of the US Tax Code, which allows you to accelerate certain deductions on business expenses into the first year.

For more information on this provision, see Section179.org.

There’s enough going on here, though, where I would encourage you to consult a CPA or enrolled agent, who can give you more specific information based on your individual situation!

Thanks, again,

Jason

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William carrillo August 8, 2013 at 11:38 am

Can I deduct the replacement of a damaged leaking toilet in a rental property?

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Jason Van Steenwyk September 10, 2013 at 4:21 pm

Chances are good you can treat that as a deduction. You aren’t replacing the whole toilet – you are simply bringing the toilet to a useable condition.

See this article for more:

http://www.realestate.com/advice/back-to-basics-what-property-expenses-are-deductible-25229/

Jason

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Bgonz July 30, 2013 at 3:16 pm

Our attached garage has suffered structural damage through the years and foundation needs to be removed and house shored up to comply with Home Insurance standards. Project will be costly. Is this type of repair ta deductible?

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Ginny July 29, 2013 at 2:53 pm

We have an investment property that doesn’t have central heating and air conditioning. We are planning to contract to have the central system installed. Is the addition of central heat and air tax deductible? Thank you,

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alan pursley January 3, 2014 at 10:43 am

yes it is. you will have to deprciate the property over a period of time though

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kenneth hardacre July 24, 2013 at 7:02 pm

i just recarpeted 2 rooms in my home, is it deductible nadnunder which from is it filed;

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alan pursley January 3, 2014 at 10:42 am

if this is your primary residence, it is not deductable. you need to add this expense to you cost basis of your house so when u sell it you will have less gain to report.

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Joe Panico June 10, 2013 at 8:30 am

I just moved into a new home and replaced the hot water heater and pressure tank to the sum of $4000. Can these be deducted on this years upcoming taxes, or are they capital improvements that can only be counted if we sell the home?

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Carol May 6, 2013 at 8:33 pm

Just sold my home, can I deduct on my taxes everything done to home major,I.e.
Finished basement, total gut and remodel kitchen and 3bathes,replaced all exterior doors and windows. Installed hardwood floors, all interior doors. Replaced deck 3 times in 37 years due to rot.
Thanks, c.s.

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Marilyn Michelson June 14, 2013 at 5:19 pm

What are allowable items which can be used toward the increased value of a home. I understand the general definition of improvement versus repair, but is there any specific list of items?

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anthony f coccia April 13, 2014 at 8:19 am

we remodeld our home in 2013 and bought a new car because the cars we had were damaged in huricane sandy can we deduct this on our taxes

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anthony f coccia April 13, 2014 at 8:34 am

can we claim home remodeling and losing 2 cars in huricane sandy? thank you
anthony c

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randa foster April 23, 2013 at 12:54 pm

I had a rental property and it had a cracked tile in the island I couldn’t find the correct tile to fix the island so I replaced it. Is this a repair or improvement. I don’t believe this increases the value of my home so I was going to count it as a repair. Please let me know

Also the AC is broken and I need to replace it. Replacing the AC wouldn’t increase the value of the house since it already had AC so is this an improvement or repair. It’s really touch to distinguish the difference between these categories. I don’t think fixing AC increases value and I had already increased the basis of the value of the house by $3000 because that’s what I paid when I originally bought the house. This house is now a rental but I used to live in it.

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Ann April 17, 2013 at 8:50 am

I just wanted to say thank you Jason for such a great article with clear explanations (including answers to the questions). This helped me tremendously with my 2012 tax return I just filed!

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Debbie April 10, 2013 at 5:14 am

Hello, I am doing various improvements on my home, carpet, new paint, ceiling fans, new cabinets, can any of this be claimed on my taxes, thanks.

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Brian Larson April 7, 2013 at 11:37 am

Jason….
I am a general building contractor and replaced my very old roof last year using a HELOC to pay for it. I paid myself to do the work, acquired permits and paid all expenses to do the project which included termite damage also. This is my personal home. My question is do I claim this project as income and treat it as all my other income, or is this deducted at time of sale and added to my basis?
Thank you in advance
Brian

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Sri April 4, 2013 at 10:02 am

We replaced part of our house with wood flooring also painting walls. Is this tax deductable?

Thanks

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AK March 26, 2013 at 5:39 pm

Hi,
Thanks for writing a wonderful article. I recently got a new job and it requires me to work from home. I am adding and addition to our house which will be my new office for work. Can I claim the construction cost of the office as expense in one tax year or do I have to amortize it over 27.5 years? The office part will attached to our house (not a separate property).

Thanks,
AK

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Regina March 21, 2013 at 2:26 pm

We purchased a home in July 2012 and had to replace the windows and doors as most were damaged. The kitchen had no fixtures or counters. Are any of these deductible? What if we are going to rent the property? Thanks.

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Cindy March 18, 2013 at 7:30 am

We inherited property and I considered commercial, as it was part of rental, the insurance company considers it commercial although we use it as a second home and rentivating it to hopefully sale one day what is tax deductible

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Jordan March 16, 2013 at 8:57 am

The sunroom on my house recently began to sink. When I went under the house I realized that when it was built or converted from a pirch into a sunroom, that they used 2x4s to support it and simply stuck them in the earth below. The 2x4s were rotting, as expected, since water was traveling off the patio and right under the sunroom. I have had to raise the room on jacks, take out the 2x4s, poor a concrete foundation and build a supporting wall and pillar just to support the weight of the room and prevent it from sinking or worse, falling off the house. Is any of this tax deductible? Thanks!

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Sindy March 10, 2013 at 11:37 am

Within 6 months of purchasing my home I had to install a$10,000 new roof. Is that deductable?

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Robin February 28, 2013 at 5:03 pm

Why are there no answers to any of these questions? My simple question is…. Is painting the house (outside) a deduction?

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Jason Van Steenwyk March 11, 2013 at 10:15 am

Hi, Robin!!! Sorry for the delay!! I’m trying to develop new material for the next columns, and haven’t been able to police up comments as much as I’d like.

The “just enough information to be dangerous” answer – which is the case with most consumer-oriented tax writing, is this:

Personal residence: Pretty much never deductible. It gets added to your basis.

Investment property: Complete paint job as part of a renovation is normally not deductible in the current year. It adds to the value of the home, so it’s considered more of a renovation than a repair. It gets added to your basis, and then depreciated over time.

BUT: Repair to fix some water damage in one corner of a room: Usually deductible as a REPAIR. It’s just bringing some damage up to snuff with the rest of the painted property.

Hope that helps!

Jason

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Richard Napier February 25, 2013 at 2:46 pm

Would resurfacing my asphalt driveway be a deduction, wouldn’t this fall under land improvements?

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Roselis DuBose February 23, 2013 at 4:58 am

Hi

I had to repair an area in my house compelely due to termites; including the floor and the walls; can I get any tax deduction?

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Jason Van Steenwyk March 11, 2013 at 1:01 pm

Hello, Roselis, and thanks for reading!

If it’s your personal residence, no deduction. Add it to basis, and then you have that much less capital gains liability when you sell your home. (Probably a non-issue, since singles get a cap gains exclusion of $250,000 and married couples $500,000 anyway, but nevertheless, the cost of repair does wind up in your tax basis for the home.

If it’s an investment property, your situation is a little trickier. I can see that being a repair, AND a renovation, depending on the set of circumstances. If you had a reasonable expectation that you would have to redo those floors going in, chances are it’s not a deduction. There are also times you can claim certain unforeseen losses as a casualty loss (meaning something you could not have reasonably predicted), then you may be able to get a deduction on anything not reimbursed to you. BUT… “progressive” damage is not one of them. The IRS considers termite and moth damage to be progressive damage, so you can’t claim a deduction for termite damage. Locusts, sure. But not termites. That’s where a personal engagement with a tax pro is necessary… the decision in this case is going to be pretty specific to your situation, based on the specific set of circumstances that I can’t conjecture on in this context.

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Christina February 19, 2013 at 9:59 am

If you bought the house and it is stated to have severe previous termite damage, and you repair this damage do to your floors caving in, would that be a tax deductable expense?

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Mike Gonzalez February 19, 2013 at 9:43 am

I inherited my uncle’s house in Nov 2012 when he passed away. I already own my own home where I live. I made $5,000 in repairs to my uncle’s house and sold it this month. I know my basis in his house is the FMV on the date he passed away. Does the $5,000 get added to my basis to arrive at my adjusted basis?

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CAROL NORTON January 30, 2013 at 4:42 pm

WE REDONE OUR BATHROOM,HAD TO TARE UP FLOOR ANS WALLS TO PUT IN INSULATION AN NEW SIDING ON 2 BEDROOMS REPLACE 3 WINDOWS. WITH ENERGY SAVING ONES, NEW TUB, SINK AND TOILETS AND FLOORING . wHAT CAN WE DEDUCT?

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Thomas Brown January 30, 2013 at 5:56 am

How about deducting the cost of a new septic system?

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Jason Van Steenwyk February 19, 2013 at 11:16 am

If it’s your residence, there’s no deduction. Add it to your cost basis. You recover it (in theory) when you sell the house. In reality, it’s usually covered under the capital gains exception for selling a personal residence (provided you have met the ownership and use test.)

If it’s an investment property, you would add it to your cost basis, and depreciate it over the expected life of the system. Now, read carefully: Normally, the depreciation period 27.5 years for integral parts of the structure of a residential building, such as venting, furnaces, new plumbing (as opposed to repairs), etc.

BUT…. Septic systems are sometimes a little different. These are separate from the building itself, and considered a LAND IMPROVEMENT, not an improvement to the structure. But if they are land improvements that are closely tied with the structure- such that the system or improvement will probably be destroyed (or have to be reinstalled) if you replace the building, you can depreciate them faster: over 15 years – in the same category as fencing and shrubbery.

See here: recenter.tamu.edu/pdf/1752.pdf

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John P. January 28, 2013 at 7:24 am

In December 2012 I bought a new property and moved in. We are currently fixing it up with new appliances, carpet, paint and other repairs. The intent is to place it as a rental in April of 2013. Are all the repairs deductable in 2013 once the property is place in service?

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Jason Van Steenwyk February 19, 2013 at 10:57 am

Hi, John!

The appliances are new, so you would depreciate those over time … think 5 to 7 years, depending on the appliance. Same for paint, if you do a new paint job, as opposed to a little touch-up to fix damage to the paint in a specific spot. New carpet is also depreciated over 5 years under MACRS rules. Each of these is specifically mentioned in the table, here: irs.gov/publications/p527/ch02.html

Now, you won’t be able to take a full deduction for 2013. It would be a partial year, because it was your own residence for January to April. But the cost still gets added to your cost basis in the home, and depreciated once it’s “placed in service” in a rental property.

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Brenda January 25, 2013 at 10:16 am

Hello,
I have a question to ask?

On Jan 1/13 I was broken into. The sliding glass door was shadder. I am on low income so I could not afford to pay out right for the glass door/instalation. Property management is paying for it but I have to pay them back installments. They had hired Delta Glass Co to do the work. Property management is the one that sent me the quote that was $275.00 that is for the single pane patio door glass, taxes, installed. But Delta Glass refuses to give the amount for the glass, tax, installed for me to ask the property management. They also refuse to give that information as well. I am paying the $275.00 back. It is my right to know. It sounds like they want to file on Real Estate tax deduction even though I am paying them back. I have a home business and I can write it off as business expence.

Brenda

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Gloria DeMartino January 11, 2013 at 11:11 am

I purchased a new roof. Is this a deductiion on my taxes?

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Jason Van Steenwyk February 19, 2013 at 10:49 am

Hi, Gloria!

If it’s your personal residence, no. You add the cost of the new roof to your tax basis in the home.

If it’s an investment property, you also don’t normally take a 1st year deduction. Instead, you add the cost of the roof – including labor – to your basis in the property. Then you gradually take a depreciation deduction.

Now, you can make small repairs to a roof, and take an immediate deduction as a rental expense. It’s a repair rather than an improvement. If you replace the whole roof, it’s a permanent improvement that raises the value of the property. So you treat it as a capital expense rather than a repair.

Special rules apply if you are replacing the roof because of a tornado, though. Then casualty loss rules come into play, and that’s a deduction – to the extent your insurance company doesn’t reimburse you.

Hope that helps!

Jason

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Jason Van Steenwyk January 9, 2013 at 2:19 pm

Hello, and thanks for writing!

The nature of the deduction you can take mostly depends on whether it’s a personal residence or an investment/rental property. If it’s a personal residence (where you live), then you can’t deduct anything. Just add it to your tax basis.

If it’s a rental property and you made a repair, not a renovation or an improvement, you can deduct the expense. You’d use Schedule E for that, unless you hold it in a corporation.See here:http://www.irs.gov/pub/irs-pdf/f1040se.pdf

If it’s an improvement or renovation as opposed to a repair, it gets added to your basis in the property and depreciated over the life of the property. For residential property that’s over 27 and a half years. You take the deduction gradually over that period of time. For more information on that, see IRS Publication 946, How To Depreciate Property. That’s the very basic version. Special rules apply if it’s for partial personal and partial investment use, or if there’s business use of the home involved. That gets very situation-specific, so that’s where you need a tax advisor, because it’s so individual.

Thanks for reading!!!

Jason

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Jennifer Hudson November 19, 2012 at 6:46 am

I did some remodeling to my bathroom and spent 13, 000. What tax deductions can I receive?

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sewal, robert January 8, 2013 at 5:57 pm

I did work on the basemnent, totalling over 25,000. what tax deduction can I receive? what form do I use?

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Jason Van Steenwyk March 11, 2013 at 1:03 pm

Hello, Jennifer!

Personal bathroom? No deduction. Add it to basis.
Investment property? Deduct if it’s a REPAIR, but not if it’s a renovation. For an investment property, you add your renovation costs, including labor, to your tax basis, and depreciate over time.

All the best,

Jason

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